Spain remains the outperformer in Europe

Morgan Stanley | The European Commission announced the end of the EDP (excessive déficit procedure) for Spain. This is good news but already expected by the markets. With growing risks in the rest of Europe, our analysts believe that Spain will remain the macro outperformer over the next few quarters thanks to its good fundamentals, with a gradual relative improvement in public finances, reducing debt and the deficit below 3% (the main reason for ening the EDP).

That said we continue to see certain downside risks in the government´s fiscal estimates, and the need for a greater effort (necessary to reduce the risks to debt sustainability). Although Spain remains one of the countries with highest growth in the Eurozone, there are growing risks, especially political uncertainty.

The Spanish top picks in our office are Cellnex (Emmet Kelly, pt euro 39, 24%, upside), Repsol (Martijn Rats, pt euro 18, 23% upside, 6.8% dy 2020), Santander (Alvaro Serrano, pt euro 5.7, 40% upside, 5.9% dy 2020), CaixaBank (Alvaro Serrano, pt euro 3.6, 28% upside, 6.7% dy 2020) and Grifols (Alex Gibson, pt euro 30, 30% upside).